The Bahamian economy continues to rebound after many years of weak if not negligible growth, Prime Minister, Dr. the Hon. Hubert A. Minnis told Parliament Tuesday (March 20).

The economy grew by 1.8 per cent in 2017. This year, a 2.5 per cent growth is expected.

Wrapping up debate on the Mid-Year Budget in the House of Assembly, Prime Minister Minnis said the Bahamian economy shrank from $10.7 billion to $10.2 billion during the years 2012-2016, a decline of $500 million or 4.7 per cent.

Prime Minister Minnis said the key driver of that decline was a sharp reduction in fixed capital formation, or investment, which over the same period fell by more than $600 million.

“That comprised a decline in spending on buildings and infrastructure of over $400 million and a fall in spending on machinery and equipment of some $200 million,” Prime Minister Minnis said.

In contrast, total consumption expenditure grew by almost $140 million and exports rose on the order of $175 million. Imports rose by $250 million.

Prime Minister Minnis said these developments “are especially worrisome for it is generally acknowledged that buoyant investment is critical to stronger, sustained, long-term growth.”

The Prime Minister said Administration officials have been working hard since being elected to office ten months ago to tackle the country’s economic and fiscal challenges.

“In the ten months since coming to office, we have begun to implement our vision for the future, with concrete action plans underpinning this vision. The key messages that were presented in the Mid-Year Budget Statement reflect both the work that we have undertaken to date, and our approach to tackling the economic and fiscal challenges going forward.

“It is evident for all to see, that our domestic economy, while rebounding gradually from many years of weak if not negligible growth, is still performing well below its potential,” Prime Minister Minnis added.

Prime Minister Minnis said if one was to take a look at the Bahamian economy over the past five years – both in absolute terms and relative to other economies – the economy has been poor.

The Bahamian economy “shrank in real terms” in 2013 by 0.6 per cent. It contracted again in 2014, by 1.2 per cent.

“The year 2015, was even worse with a further decline in economic activity of 3.1 per cent,” Prime Minister Minnis continued, “finally, in 2016, our economy stopped shrinking, but posted only negligible growth of 0.2 per cent.”

Prime Minister Minnis said over the years, there was “little surprise” with the relatively close correlation between the rate of growth of the U.S. economy and The Bahamas’ rate of economic growth as the USA “is by far our most significant trading partner.”

“However, following the great recession of 2008-2009, that correlation has broken down and the performance of The Bahamas’ economy has been much weaker than that of the U.S. As well, as was documented in the last IMF Article IV Staff report, our economic performance has also lagged significantly behind that of both the other Caribbean tourism intensive countries and non-Caribbean Small States.”

Prime Minister Minnis said “based on experience and looking ahead” Administration officials must focus the country’s policy interventions on influencing the key factors that underpin the rate of potential growth, including the quantity and quality of capital, “if we wish to successfully and meaningfully, enhance the potential growth rate of our economy.”

“On the capital front, it is vital that we achieve higher rates of saving and investment domestically as well as promote The Bahamas as an attractive locale fort strategic foreign direct investment.

“To those ends, we are striving to enhance the business and investment environment, primarily by moving to ease the burden and cost of doing business in The Bahamas,” Prime Minister Minnis added.

By Matt Maura